Malaysian headline inflation eases in November, BNM likely to remain on hold in 2020

Malaysian headline inflation came in below market expectations in November. On a year-on-year basis, the consumer price inflation came in at 0.9 percent, as compared with consensus expectations of 1.1 percent. This is a slowdown from prior month’s 1.1 percent print.

Sequentially, headline inflation in November rose modestly by 0.1 percent. The ‘housing and utilities’ component was up 0.4 percent sequentially, contributing the bulk of the rise in the overall index. In the meantime, food and transport prices stayed the same in the month. In all, inflation slowed to 0.9 percent year-on-year on an annual basis.

On a year-on-year basis, transport costs shrank 2.4 percent year-on-year in November. On average in the last six months, transport costs have constituted a 0.3 percentage point drag on annual inflation. This drag might be reversed in 2020, once the blanket RON95 fuel subsidy is lifted. Meanwhile, core inflation remained the same at 1.4 percent on a year-on-year basis in November.

“We expect inflation to average higher in 2020, mainly due to the floating of RON95 prices. Demand side pressures are likely to remain manageable. Given the improved growth prospects, we now expect Bank Negara Malaysia to remain on hold in 2020, following its decision to cut the statutory reserve requirement by 50bps in November”, said ANZ in a research report.